Chairman’s Introduction

Dear shareholder,
The period under review was one of unprecedented uncertainty and it is a huge tribute to our staff, advisers and providers that we were able to maintain and, in many cases, enhance our service to clients throughout, whilst maintaining the profitability of the Group.

As I set out at the beginning of 2020, the Board viewed the year as one for consolidating the exceptional growth of previous periods carefully, managing capital allocation and reducing the contingent consideration outstanding on previous acquisitions.

This approach left the Company well placed to react quickly to the COVID-19 crisis as it developed in the spring and enabled us to progress through the year without the need for a change in strategic direction. While 2020 may be seen as a year of consolidation rather than growth, the Company was able to strengthen its balance sheet and report increased revenues and Underlying EBITDA compared to previous years.

The Board believes that its business model of advice-led investment management and its client proposition that shares the benefits of the AFH community through lower investment costs and no platform fees has proved resilient during 2020, with outflows of client funds remaining at prior year levels in contrast to the increased outflows experienced by many in the sector.

Whilst new business inflows were impacted by COVID-19 requiring our advisers to engage with clients and prospects remotely, the post summer period saw a gradual increase in new business, driven initially by mortgage work but latterly by investment advice.

Recurring revenues again tracked the major UK indices and, despite a downturn at mid-year following the significant falls in the equity markets, ended the year at a similar level to that recorded in Q1.

During the period the Company reduced its outstanding contingent consideration on past acquisitions from £37.9m to £19.3m and is expecting to reduce this further to below £10m during the first half of the 2021 financial year.

In March 2020, the Company repurchased a portion of its 4% convertible unsecured loan stock due 2024 (“CULS”) at a discount of 13% to the nominal face value of the CULS. Following this repurchase, the aggregate outstanding nominal amount of the CULS remaining in issue is £13.6m. In September, the Company also repaid the outstanding 8% Unsecured Bonds at par as they matured.

The above transactions were carried out using the Company’s cash resources and while the HSBC facility of £12m was drawn down in March and April, this cash was unspent and remained on the Company balance sheet at the year end. On 15 January 2021 the HSBC Facility was extended to £20m on unchanged terms. This additional facility has not been drawn.

Our people
The loyalty, professionalism and hard work of our employees and advisers has never been as evident as in 2020, when we introduced new processes and systems for remote working to facilitate the smooth operation of the business in the face of a global pandemic.

Despite the challenges of such a large scale shift, in March and April the Company was able to connect over 400 employees to our systems and infrastructure to enable remote working within a few weeks and staff were extremely quick to adapt to this new style of working. These changes have allowed us to maintain regular interaction both within AFH’s departments and adviser group and externally with our clients. Since the start of the first national lockdown we were able to provide weekly updates on technical, regulatory and operational matters that were regularly attended by over 100 advisers and staff.

I would like to personally thank all our staff and advisers for the way in which they reacted to the changes and for the exceptional contribution that they collectively made to the Company and our clients.

It remains the Board’s ambition to maintain the alignment of interest between our employees and advisers with those of our clients and shareholders. We continue to develop and promote our people from within the Group at every opportunity, so that many key positions are occupied by home-grown talent. It is the enthusiasm, dedication and creativity of our staff and advisers that allows the Group to continue to deliver according to its strategy and to continue doing so even through times of adversity as we experienced in 2020.

The Board intends to continue the Group’s progressive dividend policy, while recognising the requirement to maintain sufficient cash reserves within the Company to fund its growth strategy. Having considered this, in light of the resilient performance during the year under review, it is the Board’s intention to maintain the 2020 level of dividend and will pay a first interim dividend of 3p on 16 February 2021 to shareholders on the register of members at the close of business on 29 January 2021, the ex-dividend date is 28 January 2021, and pay a second interim dividend in July 2021. This second interim dividend will be reviewed in the light of the country being released from the current lockdown restrictions and the impact on trading during the period.


The Board remains of the opinion that there is an increasing requirement for a professional, financial planning-led approach to wealth management delivered by trusted personal advisers and supported by the effective use of technology.

The Board has worked to ensure the necessary infrastructure and management is in place to support its growth plans for 2021 and beyond and has been encouraged by the proven resilience of the business under challenging economic and social conditions. Continued investment in technology and digital media is expected to accelerate the benefits of scale and the infrastructure investment made in previous periods.

The Company continues to be cash generative and, during the last year, has strengthened its balance sheet. The Board expects the pace of consolidation within the sector to increase as commercial factors and regulatory requirements encourage a smaller number of larger businesses to dominate the sector and believes that AFH is well positioned to benefit from this opportunity. As in previous years, AFH will continue to focus on driving the organic growth of the business, providing professional and cost-effective services to clients while seeking appropriately priced opportunities to expand its captive distribution throughout the financial sector to drive increased profitability and shareholder return.

Given the resilience shown in 2020 and the early months of the 2021 financial year, which despite the current lockdown anticipates a positive outcome from the vaccines being rolled out, together with the anticipated acquisition opportunities, the Board views the coming year with confidence and looks forward to continued success.


John Wheatley

15 January 2021



Annual Report

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